Real Estate News

Colorado among toughest markets to crack for first-time homebuyers

These are very special times in the metro Denver real estate market. Home prices are up, rents are up, inventories of homes both for sale and rent are low and our future outlook continues to look great. We talk about some aspect of real estate every month in this Newsletter but sometimes I think it can be hard to realize just how strong our real estate market is without taking a step back and looking at the big picture. A great way to do this is to check out the recent press headlines and review the real estate news about our local market. In a word, it is amazing!

Rank Nov '16

Hottest Markets

Rank Oct '16

Rank Change

1

San Francisco, CA

1

0

2

Dallas, TX

4

2

3

Vallejo, CA

3

0

4

Denver, CO

2

-2

5

San Jose, CA

7

2

6

San Diego, CA

6

0

7

Stockton, CA

9

2

8

Fort Wayne, IN

5

-3

9

Columbus, OH

10

1

10

Detroit, MI

12

2

Rank Nov '16

Hottest Markets

Rank Oct '16

Rank Change

11

Sacramento, CA

14

3

12

Boston, MA

8

-4

13

Santa Rosa, CA

13

0

14

Fresno, CA

17

3

15

Modesto, CA

11

-4

16

Billings, MT

58

42

17

Nashville, TN

19

2

18

Los Angeles, CA

22

4

19

Oxnard, CA

27

8

20

Colorado Springs, CO

16

-4

Colorado among toughest markets to crack for first-time homebuyers

“It’s not just your imagination: Colorado is one of the most difficult places in the country for first-time home buyers to break into the housing market. That’s according to a report released Tuesday by Bankrate.com ranking all 50 states based on home prices relative to income, job prospects for young adults, market tightness, credit availability and homeownership rates among millennials. Colorado finished in the top 10 — and not in a good way — the eighth toughest state in the U.S. when it comes to being a first-time home buyer, the report said. Rounding out the ten toughest markets were California, Hawaii, New York, Louisiana, Mississippi, Rhode Island, Texas, Oregon and Massachusetts. On the other end of the spectrum, Iowa, Utah, Minnesota, Kansas, Missouri, North Dakota, South Dakota, Wyoming, Vermont and Nebraska were the 10 easiest states for first-time buyers.” “Tight market conditions and unaffordably high prices really plague what many young Americans feel are the most desirable places to put down roots,” Bankrate.com analyst Claes Bell said. Colorado landed on the list where it did largely due to the shortage of available for-sale inventory in the market, Bell said. The state’s housing market is one of the tightest in the nation, the report said, looking at Census data on the percentage of vacant homes for sale or rent, as well as the growth rates for housing stock versus number of households. “Something I heard again and again is that first-time homebuyers suffer in a tight market. Sellers are getting multiple offers,” Bell said. “Because first-time buyers tend to be financing a large amount of their purchase relative to other buyers, they may get shortchanged.” (Affordability certainly matters, though, especially in a market like Denver where homebuyers needed to earn at least $72,771.94 a year to buy a median-priced home in the fourth quarter — and even more if they only put down 10 percent, instead of 20 percent, according to HSH.com. The median household income in the Denver metro area was $70,283 in 2015, the most recent Census data available.) Lower credit availability, determined from data from the Home Mortgage Disclosure Act on rejected mortgage applications, for one, is what pushed states like Louisiana and Mississippi near the bottom of the pile despite relatively more affordable housing stock. The job market for younger workers — derived from unemployment numbers for ages 25-34 — also plays a role. Younger buyers, Bell said, typically have thinner credit files, which makes their employment history and ability to find work in the future all the more important. But before you give up all hope, Bell recommended first-time buyers look into buyer-assistance programs in their area, as well as whether they qualify for a FHA loan requiring a lower down payment. “You don’t have to have 20 percent or even 10 percent down to buy a house,” he said. “A lot of first-time buyers qualify for FHA loans.”

Denver Post - 2/28/17

Lower credit availability, determined from data from the Home Mortgage Disclosure Act on rejected mortgage applications, for one, is what pushed states like Louisiana and Mississippi near the bottom of the pile despite relatively more affordable housing stock. The job market for younger workers — derived from unemployment numbers for ages 25-34 — also plays a role. Younger buyers, Bell said, typically have thinner credit files, which makes their employment history and ability to find work in the future all the more important. But before you give up all hope, Bell recommended first-time buyers look into buyer-assistance programs in their area, as well as whether they qualify for a FHA loan requiring a lower down payment. “You don’t have to have 20 percent or even 10 percent down to buy a house,” he said. “A lot of first-time buyers qualify for FHA loans.”

Denver Post - 2/28/17

Denver still among top 3 cities for home-resale price gains, says Case-Shiller report

“Home-resale prices in metro Denver rose by 8.9 percent in December from a year earlier, in line with the growth rate of previous months, according to the latest S&P/Case-Shiller Home Prices Indices report, issued today. Once again, Denver ranked third among the 20 large cities tracked by the closely followed Case-Shiller monthly real estate report series for year-over-year growth in home resale prices. Only Seattle and Portland saw greater annual growth rates, at 10.8 percent and 10.0 percent respectively. Those cities and Denver have shown the highest year-over-year price increases among the 20 cities for each of the last 11 months. The average year-over-year price increase for the 20 cities was 5.6 percent in December and the national rate was 5.8 percent, the report said. According to previous Case-Shiller reports, Denver saw year-over-year price growth of 8.7 percent in November and 8.3 percent in October.”

“Over the past year, Denver homes have appreciated 9.3 percent to a median of $356,900 in value, which is the ninth-highest gain in the country. That's according to online real estate company Zillow, which indicated that Nashville, Tennessee, appreciated by the greatest amount in the past year, at 12.4 percent.”

Denver Business Journal - 2/23/17

Denver apartment rent prices rise in past year and in February

“Rents for Denver apartments rose in the past year and rose in February, according to two sources. San Francisco-based Apartment List reports that Denver rent prices grew by 0.9 percent over the past month, and 1.3 percent in the past year. The median rent for a one-bedroom in Denver is $1,380, while two-bedrooms cost $1,750. Highlands Ranch is the most expensive place to rent in the Denver metro, with median rent for a two-bedroom apartment there costing $1,850, and a one-bedroom renting for $1,470. "Rents have grown by a staggering 15.6 percent over the past year," in Highlands Ranch, according to Apartment List. Over at Zumper, also from San Francisco, Denver's listed as the 22nd-most expensive place in the country for renters, with the median rent of two-bedroom apartments at $1,650 and one-bedroom apartments renting for a median of $1,250. Rents for one-bedroom apartment rose 2.5 percent in February and have risen 1.6 percent in the past year, according to Zumper.”

“The recent rise in mortgage rates could price even more prospective homeowners out of the Front Range housing market. The average interest rate on a 30-year fixed-rate mortgage has increased sharply in the months since the election, hitting a two-year high of 4.32 percent in late December, up from 3.54 percent in early November, according to Freddie Mac. Rates have stayed above 4 percent so far this year, averaging 4.17 percent last week. And while the change may seem relatively insignificant compared with historic mortgage rates, it’s enough to take a noticeable bite out of borrowers’ buying power. According to a recent analysis by Fitch Ratings, the average millennial homebuyer in the U.S. lost about 9 percent in mortgage capacity between early October and last month, all else being equal. “For the marginal borrower who’s just squeaking by to qualify, it can make a huge difference in the type of property they can get,” said Bill Warlick, a senior analyst for the credit rating agency. That’s a particularly troubling thought in metro Denver’s hot market where homeownership rates continue to fall,inventory remains constrained and the median sale price for a single-family home was $380,000 in January, according to the Denver Metro Association of Realtors. “There are always buyers right on the margin in every market,” said Lawrence Yun, chief economist for the National Association of Realtors. “In Denver, particularly with rising home values, that in itself is beginning to price people out. On top of that, you’re seeing higher interest rates. It’s a double hit.” Fitch’s study looked at the median mortgage amount for borrowers under 35 according to the most recent Federal Survey of Consumer Finances — a group of mostly first-time homebuyers who have already seen their mortgage capacity impacted in recent years by rising student loan debt, higher rents, stagnant wages and tighter underwriting standards. A borrower whose maximum loan amount was the median $120,000 when rates were at 3.42 percent in early October would have watched that same loan fall to $109,000 at 4.2 percent interest, all else being equal, according to Fitch. According to a recent NAR analysis, in Denver County, where the median home price was $359,485 in the third quarter, a borrower who put 10 percent downand locked in a 3.5 percent interest rate could expect monthly payments of $1,453. At 4.2 percent interest, an increase of 70 basis points, that monthly payment would jump by $129. At 5 percent, it’s $284 more a month In Adams County, where the median price was $272,764, a monthly payment of $1,102 at 3.5 percent interest would jump by $98 and $216, respectively.